Shares of SoFi Technologies remain down after the company announced plans to buy a banking software provider on Tuesday with $1.1bn of its stock.
The California digital finance firm entered into a definitive merger agreement with Miami-based Technisys to help meet the company’s goal of becoming a one-stop-shop for digital banking.
In early trading on Friday, SoFi is down roughly 2.37% to $10.07. The company’s shares dove just over 8% after the announcement was made on 22 February.
According to the SoFi release, Technisys’ shareholders will receive an aggregate consideration of approximately 84 million shares of SoFi common stock, which makes up less than 10% of their fully diluted share count.
Why SoFi stock is falling
In an interview with Capital.com, Edward Moya, senior market analyst for OANDA in New York, said “The financial services firm is trying to figure out how to revolutionise banking for young people, as its share price continues to freefall.”
“After getting its banking license, it’s been downhill for SoFi,” he continued. “The company is spending a lot in what will be a very competitive space by offering traditional banking, crypto, loans, and IPOs.”
“Investors are down on Fintech and SoFi’s medium-term outlook has many investors passing on the stock,” Moya said.
Why sell for SoFi stock?
Technisys CEO Miguel Santos told Capital.com, “We've agreed to an all-stock deal because we are very bullish on the joint project together.”
“The group plans to use our components to extend their banking infrastructure capabilities,” he said. “Because of the transaction, we will accelerate the platform evolution and add capabilities to the mix by bringing more value to our customers than ever before.”
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Santos said Technisys would continue operating independently under his leadership but would now be bolstered by SoFi’s comprehensive foundation.
The combined technology is expected to produce the only end-to-end vertically integrated banking technology stack, according to the release.
The merger is also anticipated to create up to $800m of additional annual revenue through 2025, while generating up to $85m in cost savings from 2023 to 2025 and up to $70m annually in 2026 and beyond.
Following a series of emails from Capital.com, SoFi Technologies declined early comment.